3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has traded in a very narrow range today. I’ve updated the chart below.

10 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continue to work through an upward retracement within a downward correction that began January 8.

What does it mean? The retracement will be followed by a downward move that will mark the end of the correction, which will be followed by a final upward push, completing the rise that began January 4.

What is the alternative? If the correction develops as a compound pattern, then the retracement will be followed by an upward separator move and then second corrective pattern.

What does Elliott wave theory say? The S&P 500 is in wave B of Submicro degree within wave 4 of Micro degree within wave 5 of Subminuette degree, all within wave 3 of Minuette degree. Fourth waves tend to be shallow, and have a tendency to produce compound patterns. Although not always, and the only way to know if a compound pattern occurs is to wait and see.

Learning and other resources. Elliott Wave International has long been the leading analytical house based on Elliott wave theory. They make available a number of free educational materials and other resources, in addition to their for-pay subscriptions.

I recommend two books, both by people associated with EWI.

First, Elliott Wave Principle by Robert Prechter and A.J. Frost is the book that, along with Prechter’s analyses, that created the revival of Elliott wave theory. I first read it in 1984, and it has had a profound influenced on my thinking about markets ever since.

Second, I’ve found Visual Guide to Elliott Wave Trading by Wayne Gorman and Jeffrey Kennedy, both of EWI, to be a useful book that relates Elliott wave theory to practical trading. The authors are hands-on Elliotticians, and for an active trader, that’s exactly what’s needed — less theory and more how-to. The first chapter of the book gives a very nice thumbnail run down of what Elliott wave theory is all about.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

Charts. On my charts, waves have a subscript showing the degree above or below the Intermediate degree. Here are the subscripts and the degree each represents:

• {+3} Supercycle
• {+2} Cycle
• {+1} Primary
• No subscript: Intermediate
• {-1} Minor
• {-2} Minute
• {-3} Minuette

By Tim Bovee, Portland, Oregon, January 13, 2021

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.